Classic Airlines Marketing Solution

Classic Airlines Marketing Solution

Kerry LePage

Economics in Health Care

April 16, 2011

Robert McManus IV

As the economic climate continues to strain organization’s and consumer’s budgets, drastic changes are occurring in the way businesses adapt and change to continue to have success. Classic Airlines is not immune to the issue. Even though Classic Airlines is ranked as the fifth largest airline, they continue to grapple with large operating expenses and decreasing customer ridership. The Chief Executive Officer (CEO) and Chief Financial Officer (CFO) need to help the company find a healthy balance to create a positive net income while increasing the number of travelers who use Classic Airlines and, specifically, enroll as a Classic Rewards member.

Situation

The Classic Rewards Program has had a 19% decrease in membership and a 21% decrease in flights taken by remaining members. A survey conducted by Classic Airlines polled 500 Gold and Platinum Rewards members and showed that 71% fly other airlines more than three times a year. The survey showed 56% of reward members are dissatisfied with the number of miles earned, 70% were dissatisfied with service upgrades and reward redemption options. As alarming as those numbers were, 68% would not recommend flying with Classic Airlines to a friend, colleague or family member. Membership has also decreased nearly 20% from last year. This accounts for about 160,000 loyalty customers flying other airlines. Over the next 18 months, corporate wants to reduce operating costs by 15% including a 15% marketing reduction (Phoenix, 2001). These facts clearly suggest that Classic Airlines must reevaluate the way it markets itself to both new and returning customers and that it must overhaul its rewards program.

Classic Airlines’s records indicate a net operating loss for 2003 and 2004 shows that they lost money during the months from January through April and also in October. Another challenge for Classic Airlines is the...